Comprehensive Housing Market Analysis For Baltimore, Maryland (hud)

C O M P R E H E N S I V E

H O U S I N G

M A R K E T

A N A L Y S I S

Baltimore, Maryland U.S. Department of Housing and Urban Development

Office of Policy Development and Research

As of April 1, 2008

Summary Economy

Housing Market Area

Lancaster

York

Adams

Pennsylvania Maryland

Carroll Frederick

Cecil

Harford

Baltimore City of Baltimore

Kent

Howard District of Anne Columbia Arundel

Montgomery

Queen Anne's

Charles

Chesape

Prince George's Calvert

Virginia

ake Bay

Fairfax

Talbot

Dorchester

The Baltimore, Maryland Housing Market Area (HMA) is divided into three submarkets: the city of Baltimore submarket; the Northern Suburbs submarket, which consists of Baltimore, Carroll, and Harford Counties; and the Southern Suburbs submarket, which includes Anne Arundel and Howard Counties. The HMA encompasses most of the Baltimore-Towson, Maryland Metropolitan Statistical Area (MSA), with the exception of Queen Anne’s County. The HMA is within commuting distance of the Washington, D.C. metropolitan area.

Since 2004, employment in the Baltimore HMA has increased more rapidly than during the early 2000s. Education and health services is the largest and fastest growing sector of the economy. This sector includes the largest employer, Johns Hopkins University, as well as several medical research facilities. The government sector, which includes two military bases, helps provide stability to the economy. During the 3-year forecast period, the economy is expected to continue to expand with new biotechnology jobs and increased employment resulting from actions related to the Base Closure and Realignment (BRAC) Act.

Sales Market Despite recent declines in home sales and prices, the sales housing market in the Baltimore HMA is balanced with a vacancy rate of 1.3 percent. According to Metropolitan Regional Information Systems, Inc. (MRIS®), as of March 2008, in the Baltimore HMA, the median sales price of a single-family home was $259,900, a

decline of 3 percent from the price recorded in March 2007. Home sales decreased by 34 percent, from nearly 2,875 homes sold in the 12 months ending March 2007 to approximately 1,900 homes in the 12 months ending March 2008. An expanding economy and continued household growth will result in a demand for 21,150 new homes during the 3-year forecast period, as shown in Table 1.

Rental Market The rental housing market in the HMA is currently balanced, with an overall vacancy rate of 6.8 percent. The luxury apartment market is currently soft, particularly in downtown Baltimore, because recently completed units entering the market have been absorbed more slowly than builders anticipated. According to Delta Associates, in March 2008, vacancy rates for Class A units in large developments with all amenities in the HMA have increased to 11 percent, compared with 6 percent during March 2007. During the forecast period, household growth will contribute to a demand for 4,075 marketrate rental units, as shown in Table 1.

Market Details Economic Conditions..................................................................2 Population and Households........................................................4 Housing Market Trends...............................................................6 Data Profiles..............................................................................15

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Summary Continued

Table 1. Housing Demand in the Baltimore HMA, 3-Year Forecast, April 1, 2008 to April 1, 2011 Baltimore HMA

Total Demand

Northern Suburbs Submarket

Southern Suburbs Submarket

Sales Units

Rental Units

Sales Units

Rental Units

Sales Units

Rental Units

Sales Units

Rental Units

21,150

4,075

725

400

12,000

1,800

8,425

1,875

4,805

1,675

730

280

1,525

280

2,550

1,115

Under Construction

Notes: Total demand represents estimated production necessary to achieve a balanced market at the end of the forecast period. Units under construction as of April 1, 2008. Forecast demand in the city of Baltimore is limited primarily to downtown Baltimore and adjacent areas. Source: Estimates by analyst

Economic Conditions

T

he economy of the Baltimore HMA expanded between 2004 and 2006, after fluctuating during the first few years of the decade. Resident employment remained nearly unchanged from 2000 to 2004; however, from 2004 to 2006, it increased by 26,700, or 2 percent, annually. Service-providing sectors contributed to the expansion, with particular strength in the education and health services sector. During the 12 months ending March 2008, resident employment increased by 5,200 people, or 0.4 percent, an improvement over the decline of 3,850 people, or 0.3 percent, that occurred during the previous 12-month period ending March 2007.

The unemployment rate decreased from 4 percent in March 2007 to 3.7 percent in March 2008. Figure 1 provides information on trends in the labor force, resident employment, and unemployment rate in the HMA from 1990 to 2007. Since 2000, total nonfarm employment has increased, adding an average of 8,900 jobs, or 0.8 percent, a year. Service-providing sectors led the growth, with the education and health services and the professional and business services sectors accounting for twothirds of the jobs added. During the 12 months ending March 2008, the

Figure 1. Trends in Labor Force, Resident Employment, and Unemployment Rate in the Baltimore HMA, 1990 to 2007

8.0

1,340,000

6.0 1,240,000 4.0 1,140,000

2.0 0.0

Source: U.S. Bureau of Labor Statistics

07

06

Unemployment Rate

20

20

4

3

05 20

20 0

2

20 0

01

Resident Employment

20 0

00

20

20

99

7

98

19

19

6

19 9

19 9

95

94

Labor Force

19

19

93 19

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92 19

19

19

90

1,040,000

Unemployment Rate

10.0

1,440,000

Labor Force & Resident Employment

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

City of Baltimore Submarket

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Economic Conditions Continued

Figure 2. Current Employment in the Baltimore HMA, by Sector Government 16.9%

Natural Resources, Mining, & Construction 6.5% Manufacturing 5.3%

Other Services 4.3%

Wholesale & Retail Trade 15.2%

Leisure & Hospitality 8.9%

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

Transportation & Utilities 3.4% Education & Health Services 17.0%

Information 1.5% Financial Activities 6.1%

Professional & Business Services 14.6%

Note: Based on 12-month averages through March 2008. Source: U.S. Bureau of Labor Statistics

Table 2. Major Employers in the Baltimore HMA Name of Employer Johns Hopkins University Fort George G. Meade MedStar Health Johns Hopkins Health System National Security Agency/Central Security Service Aberdeen Proving Ground University of Maryland Medical System Northrop Grumman Corporation LifeBridge Health Constellation Energy Group, Inc.

Employment Sector

Number of Employees

Education & Health Services Government Education & Health Services Education & Health Services Government

28,500 28,000 23,000 16,750 14,000

Government Education & Health Services Manufacturing Education & Health Services Utilities

12,500 11,300 9,500 7,100 6,000

Sources: Economy.com; Anne Arundel Economic Development Corporation

Table 3. 12-Month Average Employment in the Baltimore HMA, by Sector Employment Sector Total Nonfarm Employment Goods Producing Natural Resources, Mining, & Construction Manufacturing Service Providing Wholesale & Retail Trade Transportation & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospitality Other Services Government

12 Months Ending March 2007

12 Months Ending March 2008

Percent Change

1,310,300 158,600 86,200

1,322,000 156,400 86,000

0.9 – 1.4 – 0.2

72,400 1,151,700 200,900 45,400 22,400 82,400 189,800 218,200 114,600 56,500 221,600

70,300 1,165,400 201,300 45,200 24,100 80,500 192,700 224,600 117,600 56,700 222,800

– 2.9 1.2 0.2 – 0.4 7.6 – 2.3 1.5 2.9 2.6 0.4 0.5

Notes: Based on 12-month averages through March 2007 and March 2008. Numbers may not add to totals because of rounding. Source: U.S. Bureau of Labor Statistics

education and health services sector, which is the largest sector in the HMA (see Figure 2), increased rapidly due to hospital expansions. Employment at local hospitals increased by 2,400 jobs, or 3.8 percent, during the 12 months ending March 2008. Five of the ten leading employers in the HMA are in the education and health services sector, as shown in Table 2. The economic impact of the 16 area colleges and universities, as well as two teaching hospitals, was an estimated $17.2 billion on the regional economy. Since 2000, the professional and business services sector has added jobs at a rate of 2,400, or 1.4 percent, annually due to increases in scientific research and development and related industries. Table 3 provides the average employment by sector for the two most recent 12-month periods. Figure 3 illustrates employment growth by sector in the HMA since 1990. Government, the second largest employment sector in the HMA, includes employees at two military bases: Fort George G. Meade, located in Anne Arundel County, and Aberdeen Proving Ground, located in Harford County. In addition, the headquarters of the National Security Agency/Central Security Service is located at Fort Meade. The largest manufacturing employer in the HMA is the Northrop Grumman Corporation, a contractor for the U.S. Department of Defense that produces electronic systems. The government sector provides stability to the economy, and most of the recent growth has been in local government jobs. As a result of the BRAC actions, a net gain of 7,525 jobs is expected in the HMA, including 5,350 jobs at Fort Meade in 2011 and 2,175 jobs at Aberdeen Proving Ground in 2012. Nearly

Economic Conditions Continued

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all the increase will be in civilian employment, with the exception of 680 military positions at Fort Meade. Approximately 25 percent of the jobs resulting from the BRAC actions are expected to be added during the 3-year forecast period. During the forecast period, resident employment is expected to increase by 8,800 people, and nonfarm employment is expected to increase by 8,925 jobs. The education and

health services sector is expected to continue to increase with the expansion of hospitals and biotechnology parks. Development of medical and research facilities totaling $1.6 billion is currently under way, with construction likely to be completed during the forecast period. Leading employers, including Johns Hopkins Health System and the University of Maryland Medical System, account for more than 75 percent of the development.

Figure 3. Sector Growth in the Baltimore HMA, Percentage Change, 1990 to Current Total Nonfarm Employment Goods Producing Natural Resources, Mining, & Construction Manufacturing Service Providing Wholesale & Retail Trade Transportation & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospitality Other Services Government

– 50

– 40

– 30

– 20

–10

0

10

20

30

40

50

60

Note: Current is based on 12-month averages through March 2008. Source: U.S. Bureau of Labor Statistics

Population and Households

T

he population of the Baltimore HMA increased more slowly from 2000 to the current date than it did during the 1990s. The slower growth occurred primarily in the Southern Suburbs submarket, where population growth declined to approximately one-half the rate of the 1990s. Both net in-migration and net

natural change (resident births minus resident deaths) increased by a slower rate than they did during the preceding decade. The scarcity of large tracts of developable land resulted in fewer subdivisions being constructed. The current population of the HMA totals 2.6 million. As a result of changes to military presence in the area, as

Population and Households Continued

directed by BRAC actions, during the forecast period, the population is expected to increase as the first wave of new households move to the area; however, approximately 75 percent of the BRAC-related population increase will occur after the forecast period. Figure 4 illustrates population and household growth in the HMA from 1990 to the forecast date. Figure 5 depicts components of population change in the HMA for the same period. The population of the city of Baltimore submarket, which now totals 624,500, continues to decrease but at a slower pace than the rate of growth during the 1990s. Since 2000, as a result of the increasing popularity of the downtown area among young Figure 4. Population and Household Growth in the Baltimore HMA, 1990 to Forecast 18,000

Average Annual Change

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1990 to 2000

2000 to Current Population

Current to Forecast

Households

Sources: 1990 and 2000—U.S. Census; current and forecast—estimates by analyst

Figure 5. Components of Population Change in the Baltimore HMA, 1990 to Forecast 14,000 Average Annual Change

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professionals and retirees, net outmigration has slowed to 5,000 people annually, compared with 10,500 people during the 1990s. During the forecast period, the net out-migration is expected to continue to decrease to approximately 4,000 people annually. Despite overall population declines in the city, significant population growth has occurred in the 15 census tracts encompassing downtown Baltimore and the surrounding areas. Since 2000, the population of the downtown area has grown by 670, or 1.9 percent, annually, to its current level of 40,400, and it is expected to add another 700 people a year through 2011. The population of the Northern Suburbs submarket, which now totals 1.2 million, continues to grow but at a slower pace than it did during the 1990s. Since 2000, the rate of population growth has declined to 9,150 people a year from 12,600 people annually during the 1990s due to a decrease in net in-migration. During the forecast period, however, international migration to the Northern Suburbs submarket, particularly in Baltimore County, is expected to increase slightly. Existing ethnic communities in Baltimore County are expected to expand, with a portion of the migration continuing to be from Mexico and Pakistan. Despite the slight increase in net in-migration, the population growth rate is expected to remain unchanged during the forecast period.

12,000 10,000 8,000 6,000 4,000 2,000 0

1990 to 2000

2000 to Current Net Natural Change

Current to Forecast Net Migration

Sources: 1990 and 2000—U.S. Census; current and forecast—estimates by analyst

Although population growth has slowed in the Southern Suburbs submarket, this area remains the fastest growing submarket in the HMA, with a current population of 795,500. Population increases of 7,250 annually since 2000 have been lower than the rapid increase of 12,300 annually that occurred

Population and Households Continued

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6 during the 1990s. Since 2000, net in-migration has declined, partly due to a decrease in the number of large tracts of developable land; however, the area continues to expand because of its location, within commuting distance of the cities of Baltimore and Washington, D.C. Growth is expected to continue at a rate of 7,325 people annually during the forecast period as net in-migration increases as a result of the BRAC actions. As with population growth, the number of households in the HMA has increased more slowly since 2000 compared with the growth rate in the 1990s. Currently, more than 1 million households reside in the HMA. During

the forecast period, annual household growth is projected to remain at 6,000, or increase by only 0.6 percent, which is approximately the same rate as household growth from 2000 to the current date. The population is expected to increase at a slightly faster pace of 14,650 a year, compared with 13,050 annually from 2000 to the current date. In recent years, net natural change has risen as a result of an increasing number of births, and the trend is expected to continue during the forecast period. See Tables DP-1, DP-2, DP-3, and DP-4 at the end of this report for detailed information about population and household growth in the HMA and the three submarkets.

Housing Market Trends Sales Market—City of Baltimore Submarket The sales housing market in the city of Baltimore submarket is slightly soft with a current vacancy rate of 2.5 percent, down from the 3.6-percent rate reported in the 2000 Census. The vacancy rate in the city is higher than in the suburban submarkets because of a large number of older, singlefamily homes available for sale. Figure 6. Number of Households by Tenure in the City of Baltimore Submarket, 1990 to Current 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1990

2000 Renter

Current Owner

Sources: 1990 and 2000—1990 Census and 2000 Census; current—estimates by analyst

Vacancy rates declined during 2005 and 2006 but increased during the past year as the inventory of unsold homes grew in response to declining sales. The inventory of unsold homes increased by 18 percent to more than 5,500 homes in March 2008 compared with the inventory in March 2007, according to the Maryland Association of REALTORS®. As a result of the popularity of condominiums in the downtown area, the number of owner households in the city increased between 2000 and the current date, as shown in Figure 6. During the 12 months ending March 2008, the sales market has slowed as a result of stricter lending requirements; however, prices have remained relatively steady. According to MRIS, in the city of Baltimore submarket during

Sales Market—City of Baltimore Submarket Continued

the 12 months ending March 2008, home sales were down more than 26 percent compared with sales during the 12 months ending March 2007. Despite the decline in sales, the median price increased 3 percent, from $150,000 in March 2007 to $155,000 in March 2008. According to local sources, sales of condominiums in the $500,000-to-$1,000,000 price range have slowed, but sales of condominiums priced at less than $500,000 and at more than $1 million have remained steady. Since 2000, the number of building permits issued for single-family homes has increased due to the popularity of the downtown area among young professionals and retirees. During the 1990s, an average of 120 permits Figure 7. Single-Family Building Permits Issued in the City of Baltimore Submarket, 1990 to 2008 700 600 500 400 300 200 100

08

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

20

99

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Housing Market Trends

Notes: Includes only single-family units. Includes data through March 2008. Source: U.S. Census Bureau, Building Permits Survey

Table 4. Estimated Demand for New Market-Rate Sales Housing in the City of Baltimore Submarket, April 1, 2008 to April 1, 2011 Price Range ($) From

To

200,000 250,000 300,000 400,000 500,000

249,999 299,999 399,999 499,999 and higher

Source: Estimates by analyst

Units of Demand 70 175 210 180 90

Percent of Total 9.7 24.1 29.0 24.8 12.4

for single-family homes were issued annually, compared with an average of 300 a year from 2000 to the current date. The number of single-family permits reached a peak of 640 homes in 2005 and has decreased since then, as shown in Figure 7. During the 12 months ending March 2008, 150 permits were issued for single-family homes, a decline from the 325 issued during the 12 months ending March 2007. Condominium development is occurring primarily in the downtown and surrounding areas. A total of 730 condominium units are currently under construction, including two large developments with a combined total of nearly 600 units. In response to slower sales, however, builders are currently delaying new home construction while existing inventories are absorbed. During the next 3 years, demand is forecast for 725 new homes, including both single-family and condominium units. Prices for new units are expected to start at $200,000. Currently, approximately 730 homes are under construction, all condominium units. The construction pipeline totals 1,100 additional sales units planned for completion during the forecast period, and approximately 75 percent of those units are condominiums. Continued tighter lending practices may cause developers to cancel or switch some condominium projects to the rental market. Table 4 presents detailed information on the estimated demand for new market-rate sales housing by price range in the city of Baltimore submarket during the forecast period.

8

Housing Market Trends Continued

Rental Market—City of Baltimore Submarket

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With an overall vacancy rate of 8 percent, the rental housing market in the city of Baltimore submarket has softened slightly compared with the vacancy rate of 7.6 percent recorded in 2000, as shown in Figure 8. Despite a higher vacancy rate than in the suburban submarkets, the rental market in the city is still considered balanced. Many of the available rental units in the submarket are older and lack modern amenities such as garage parking, a fitness center, and a swimming pool. Vacancies are highest, however, for Class A units in large developments with all amenities, particularly for new units located in the downtown and Fells Point areas of the city due to recent overbuilding. More than 600 units are currently leasing in Figure 8. Rental Vacancy Rates in the City of Baltimore Submarket, 1990 to Current 10.0 9.0

8.0

7.5

7.6

1990

2000

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

Current

Sources: 1990 and 2000—1990 Census and 2000 Census; current—estimates by analyst

Figure 9. Multifamily Building Permits Issued in the City of Baltimore Submarket, 1990 to 2008 700 600 500 400 300 200 100

Source: U.S. Census Bureau, Building Permits Survey

During the 1990s, permits were issued for an average of 80 multifamily units annually; however, the average increased to 310 units a year from 2000 to the current date, as shown in Figure 9. Since 2000, the conversion of obsolete commercial buildings into apartments has resulted in the addition of 600 rental units, which are not included in the number of building permits issued. During the 12 months ending March 2008, 457 multifamily units were permitted, an increase of 54 percent over the number permitted during the previous 12-month period. Of the 1,000 multifamily units currently under construction, approximately 70 percent are condominium units. During the forecast period, 2,300 units are planned for construction, with approximately one-half of the units expected to be rentals. As the economy expands with the addition of healthcare jobs, and as young professionals and retirees continue to migrate to the area, the current soft market conditions are expected to improve for Class A rental units. Should a significant portion of the pipeline of condominium units switch to rentals, however, the soft rental market for Class A units will continue through the forecast period. According to Reis, Inc., rents in the city of Baltimore submarket increased 5 percent to $1,076 as of March 2008, compared with the previous year.

08

07

Notes: Includes all multifamily units in structures with two or more units. Includes data through March 2008.

20

06

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those areas. According to Delta Associates, as of March 2008, the vacancy rate for Class A units in the city of Baltimore submarket was 20 percent, double the 10-percent vacancy rate reported as of March 2007.

During the next 3 years, demand for new market-rate rental units in the city of Baltimore submarket will occur

9

Housing Market Trends Rental Market—City of Baltimore Submarket Continued

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

mostly in and around the downtown area. Demand is forecast for a total of 400 rental units, including the 280 units currently under construction. Rents for the new units are projected to start at $1,100 for an efficiency unit, $1,350 for a one-bedroom unit,

$1,600 for a two-bedroom unit, and $2,200 for a three-bedroom unit. Table 5 presents detailed information about the estimated demand for new market-rate rental housing by number of bedrooms and rent level in the submarket during the forecast period.

Table 5. Estimated Demand for New Market-Rate Rental Housing in the City of Baltimore Submarket, April 1, 2008 to April 1, 2011 Zero Bedrooms Monthly Gross Rent ($)

One Bedroom

Units of Demand

1,100 1,150 1,200 1,250 and higher

20 20 20 10

Two Bedrooms

Three or More Bedrooms

Monthly Gross Rent ($)

Units of Demand

Monthly Gross Rent ($)

Units of Demand

Monthly Gross Rent ($)

1,350 1,400 1,450 1,500 1,550 1,600 1,650 1,750 and higher

220 190 180 160 140 120 100 80

1,600 1,650 1,700 1,750 1,800 1,850 1,900 2,000 and higher

120 100 90 80 70 60 50 40

2,200 2,250 2,300 2,350 2,400 2,450 2,500 2,600 and higher

Units of Demand 40 40 30 30 20 20 20 10

Notes: Distribution above is noncumulative. Demand shown at any rent represents demand at that level and higher. Forecast demand in the city of Baltimore is limited primarily to downtown Baltimore and adjacent areas. Source: Estimates by analyst

Sales Market—Northern Suburbs Submarket The sales market in the Northern Suburbs submarket is balanced, with a vacancy rate of 1 percent, slightly lower than the rate of 1.3 percent recorded in 2000; however, during the 12 months ending March 2008, sales activity has slowed. The percentage of owner households has increased from Figure 10. Number of Households by Tenure in the Northern Suburbs Submarket, 1990 to Current 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 1990

2000 Renter

Current Owner

Sources: 1990 and 2000—1990 Census and 2000 Census; current—estimates by analyst

69 percent of all households in 1990 to 73 percent as of the current date, as shown in Figure 10. According to MRIS, the average price of a singlefamily home remained nearly constant at $310,500, increasing by approximately 1 percent during the 12 months ending March 2008 compared with the price recorded during the previous year. Home sales in the submarket have fallen by more than 21 percent, declining from nearly 15,100 during the 12 months ending March 2007 to approximately 11,800 for the 12 months ending March 2008. Due to the recent slowdown in the sales market, developers have reduced the volume of homebuilding. Since 2000, construction activity has averaged 4,300 single-family homes a year— less than the 5,300 homes constructed annually during the 1990s. In the past year, new home construction, as mea-

10

Housing Market Trends Sales Market—Northern Suburbs Submarket Continued

sured by the number of building permits issued for single-family homes, decreased by more than 35 percent, declining to 1,975 homes for the 12 months ending March 2008.

8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000

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07

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Figure 11. Single-Family Building Permits Issued in the Northern Suburbs Submarket, 1990 to 2008

Notes: Includes only single-family units. Includes data through March 2008. Source: U.S. Census Bureau, Building Permits Survey

Table 6. Estimated Demand for New Market-Rate Sales Housing in the Northern Suburbs Submarket, April 1, 2008 to April 1, 2011 Price Range ($) From

To

200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,250,000 1,500,000

299,999 399,999 499,999 599,999 699,999 799,999 899,999 1,249,999 1,499,999 and higher

Units of Demand

Percent of Total

120 1,200 2,400 1,800 1,680 1,560 1,320 960 840 120

1.0 10.0 20.0 15.0 14.0 13.0 11.0 8.0 7.0 1.0

Nearly 90 percent of the new homes currently under construction are located in Baltimore and Harford Counties. Figure 11 provides data on singlefamily building permits issued in the Northern Suburbs submarket from 1990 through March 2008. During the next 3 years, demand is forecast for 12,000 new single-family homes and condominium units. Annual forecast demand is slightly less than the average of 4,125 homes that have entered the market each year since 2000. Home prices are expected to start at $200,000. Although the sales market has slowed during the past year, it is expected to improve during the next 3 years as the economy expands and in-migration increases. Historically, 40 percent of the production in the submarket has occurred in Baltimore County, 40 percent in Harford County, and 20 percent in Carroll County. Demand is expected to follow a similar pattern during the forecast period. Table 6 presents detailed information on the estimated demand for new sales housing by price range in the Northern Suburbs submarket during the forecast period.

Source: Estimates by analyst

Rental Market—Northern Suburbs Submarket The rental market in the Northern Suburbs submarket is currently balanced, with an overall vacancy rate of 6.5 percent, despite an increase from the 5.6-percent rate recorded as of the 2000 Census (see Figure 12). Since 2000, rental market conditions have softened a bit as mortgage interest rates have declined, enabling more households to become homeowners. According to Delta Associates, as of March 2008, Class A units in large developments with all amenities have

a vacancy rate of 7.8 percent, higher than the 5-percent rate reported a year ago. Vacancy rates in Class A developments are 8 to 9 percent in Baltimore County; however, conditions are tighter in the rest of the submarket. Since 2000, approximately 70 percent of the multifamily construction has occurred in Baltimore County, where approximately 350 new rental units are currently being marketed. In Harford County, the Class A vacancy rate

11

Housing Market Trends Rental Market—Northern Suburbs Submarket Continued

Since 2000, building permits have been issued for an average of 980 multifamily units a year, nearly 17 percent less than the annual average of 1,175 permits issued during the 1990s. Also, since 2000, approximately 80 percent Figure 12. Rental Vacancy Rates in the Northern Suburbs Submarket, 1990 to Current 10.0 9.0 8.0

7.0

7.0

6.5 5.6

6.0 5.0 4.0 3.0 2.0 1.0 0.0

1990

2000

Current

Sources: 1990 and 2000—1990 Census and 2000 Census; current—estimates by analyst

Figure 13. Multifamily Building Permits Issued in the Northern Suburbs Submarket, 1990 to 2008 2,500 2,000 1,500 1,000 500

Source: U.S. Census Bureau, Building Permits Survey

08

07

Notes: Includes all multifamily units in structures with two or more units. Includes data through March 2008.

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B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

is 1 percent, even lower than the 3-percent rate recorded a year ago. The construction of new apartments in Harford County has occurred at a moderate pace, averaging 230 units annually since 2000.

of multifamily units constructed have been rentals, while the remaining units have been condominiums. The number of units permitted decreased during the 12 months ending March 2008, with permits issued for 570 multifamily units, 13 percent less than the number issued during the same period a year ago. One of the largest multifamily developments, The Quarter, containing 900 units, is currently under construction in Towson near the Town Center. The first phase of the development of 150 condominiums and 280 apartments began in 2007 and is expected to be completed by the end of 2008. Additional phases will include 295 apartment units and another 175 units, which will be rentals or condominiums depending on market conditions. See Figure 13 for information on the number of multifamily building permits issued in the submarket from 1990 to 2008. During the next 3 years, demand is forecast for 1,800 new market-rate rental housing units, including the 280 units currently under construction. Rents for the new units are projected to start at $900 for an efficiency unit, $1,100 for a one-bedroom unit, $1,550 for a two-bedroom unit, and $1,700 for a three-bedroom unit. Table 7 provides the estimated demand for new marketrate rental housing by number of bedrooms and rent level in the submarket during the forecast period.

12

Housing Market Trends Rental Market—Northern Suburbs Submarket Continued

Table 7. Estimated Demand for New Market-Rate Rental Housing in the Northern Suburbs Submarket, April 1, 2008 to April 1, 2011

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

Zero Bedrooms

One Bedroom

Two Bedrooms

Three or More Bedrooms

Monthly Gross Rent ($)

Units of Demand

Monthly Gross Rent ($)

Units of Demand

Monthly Gross Rent ($)

Units of Demand

Monthly Gross Rent ($)

Units of Demand

900 950 1,000 1,050 1,100 1,150 1,200 1,300 1,400 1,500 1,600 and higher

125 110 100 90 70 60 50 40 30 20 20

1,100 1,150 1,200 1,250 1,300 1,350 1,400 1,500 1,600 1,700 1,800 and higher

625 550 510 450 400 340 280 230 180 140 110

1,550 1,600 1,650 1,700 1,750 1,800 1,850 1,950 2,050 2,150 2,250 and higher

870 720 660 590 510 440 370 300 190 130 90

1,700 1,750 1,800 1,850 1,900 1,950 2,000 2,100 2,200 2,300 2,400 and higher

180 160 150 130 100 90 80 60 40 30 30

Notes: Distribution above is noncumulative. Demand shown at any rent represents demand at that level and higher. Source: Estimates by analyst

Sales Market—Southern Suburbs Submarket The sales market in the Southern Suburbs submarket is currently balanced, with a vacancy rate of 1 percent, identical to the rate recorded in 2000; however, sales activity has slowed during the past year. According to MRIS, as of the 12 months ending March 2008, the average price of a single-family home remained nearly unchanged at $427,400, declining by less than 1 percent from the previous year. During the same period, sales decreased to 8,650 homes, which is 24 percent less when compared with the number of homes sold during the previous 12 months. Figure 14. Single-Family Building Permits Issued in the Southern Suburbs Submarket, 1990 to 2008 7,000 6,000 5,000 4,000 3,000

Although the sales market in the Southern Suburbs submarket has slowed, the decrease in the volume of homebuilding has been less severe than in the other submarkets of the HMA. Recent increases in interest rates and the supply of unsold homes on the market have resulted in fewer units currently in development. Since 2000, construction activity, as measured by the number of building permits issued, has averaged 3,175 units a year, down from the 4,250 units permitted annually during the 1990s. The number of permits issued for single-family homes declined by 4 percent to 1,950 permits during the 12 months ending March 2008 compared with the number issued during the previous year, as shown in Figure 14. Despite the recent slowing in the sales market, the number of owner households has increased from 73 percent in 1990 to 77 percent as of the current date, as shown in Figure 15.

2,000 1,000

08

07

Notes: Includes only single-family units. Includes data through March 2008. Source: U.S. Census Bureau, Building Permits Survey

20

06

20

05

20

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

93

19

92

19

91

19

19

19

90

0

In the Southern Suburbs submarket, several condominium developments, with approximately 1,925 units, are under construction, with more than

13

Housing Market Trends Sales Market—Southern Suburbs Submarket Continued

Figure 15. Number of Households by Tenure in the Southern Suburbs Submarket, 1990 to Current 250,000 200,000 150,000 100,000 50,000

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

0

1990

2000 Renter

Current Owner

Sources: 1990 and 2000—1990 Census and 2000 Census; current—estimates by analyst

Table 8. Estimated Demand for New Market-Rate Sales Housing in the Southern Suburbs Submarket, April 1, 2008 to April 1, 2011 Price Range ($) From

To

225,000 300,000 400,000 500,000 600,000 800,000 1,000,000 1,500,000

299,999 399,999 499,999 599,999 799,999 999,999 1,499,999 and higher

70 percent of the units located in Anne Arundel County. Nearly 700 units are being built at the Town Center in Annapolis. In addition, approximately 1,000 condominium units are in the planning phase, with 90 percent of the units planned for construction in Anne Arundel County.

Units of Demand

Percent of Total

300 420 1,000 1,525 2,200 1,675 1,175 130

3.6 5.0 11.9 18.1 26.1 19.9 13.9 1.5

Source: Estimates by analyst

During the 3-year forecast period, demand in the Southern Suburbs submarket is estimated for 8,425 new single-family homes and condominiums, with prices starting at $225,000. As a result of the slowing sales market, annual forecast demand is slightly less than the average number of homes that entered the market each year from 2000 to the current date. A portion of the demand will be influenced by the BRAC action, which will result in an increased number of households moving to the area. Table 8 presents detailed information on the estimated demand for new market-rate sales housing by price range in the submarket during the forecast period.

Rental Market—Southern Suburbs Submarket The rental market in the Southern Suburbs submarket is currently balanced, with a vacancy rate of 5.5 percent, the lowest overall vacancy rate in the HMA, as shown in Figure 16. Figure 16. Rental Vacancy Rates in the Southern Suburbs Submarket, 1990 to Current 10.0 9.0 8.0 7.0

6.7 5.5

6.0 5.0

4.2

4.0 3.0 2.0 1.0 0.0

According to Delta Associates, vacancies at Class A units in large developments with all amenities increased from 6 percent in March 2007 to 10 percent in March 2008. Approximately 1,350 recently constructed rental units are being marketed in the submarket, with nearly 90 percent located in Anne Arundel County. Absorption of units in Anne Arundel County has been strong, averaging more than 30 units a month since 2007.

1990

2000

Current

Sources: 1990 and 2000—1990 Census and 2000 Census; current—estimates by analyst

During the past year, the level of multifamily construction has declined below the average number of units built annually since 2000. Although the number of building permits issued for

Rental Market—Southern Suburbs Submarket Continued

multifamily units has fluctuated from year to year, the average annual rate has been 1,050 permits issued since 2000, the same as during the 1990s, as shown in Figure 17. During the 12 months ending March 2008, the number of building permits issued for multifamily units declined to 830, 7 percent less than the number issued during the same period a year ago. Figure 17. Multifamily Building Permits Issued in the Southern Suburbs Submarket, 1990 to 2008 3,000 2,500 2,000 1,500 1,000 500

08

07

20

06

20

20

04

05

20

20

02

03

20

20

00

01

20

20

98

99 19

97

96

19

19

19

94

95 19

93

19

19

91

92 19

19

90

0

19

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

14

Housing Market Trends

Notes: Includes all multifamily units in structures with two or more units. Includes data through March 2008. Source: U.S. Census Bureau, Building Permits Survey

Currently, 620 apartment units are under construction in Anne Arundel County and 495 units are under construction in Howard County. These 1,115 apartment units are in addition to the 1,925 condominium units currently under construction in the submarket. Anticipated household growth will result in a demand for a total of 1,875 new market-rate rental housing units during the next 3 years, including the 1,115 units currently under construction. Rents for the new units are projected to start at $900 for an efficiency unit, $1,150 for a one-bedroom unit, $1,500 for a two-bedroom unit, and $1,800 for a three-bedroom unit. Table 9 provides the estimated demand for new market-rate rental housing by number of bedrooms and rent level in the submarket during the forecast period.

Table 9. Estimated Demand for New Market-Rate Rental Housing in the Southern Suburbs Submarket, April 1, 2008 to April 1, 2011 Zero Bedrooms Monthly Gross Rent ($) 900 950 1,000 1,050 1,100 1,150 1,200 1,300 1,400 and higher

One Bedroom

Units of Demand 60 50 40 40 30 30 20 20 10

Two Bedrooms

Three or More Bedrooms

Monthly Gross Rent ($)

Units of Demand

Monthly Gross Rent ($)

Units of Demand

Monthly Gross Rent ($)

Units of Demand

1,150 1,200 1,250 1,300 1,350 1,400 1,450 1,550 1,650 and higher

560 500 460 410 360 300 250 200 160

1,500 1,550 1,600 1,650 1,700 1,750 1,800 1,900 2,000 and higher

1,125 930 860 770 660 560 470 380 250

1,800 1,850 1,900 1,950 2,000 2,050 2,100 2,200 2,300 and higher

130 120 110 90 80 70 60 40 30

Notes: Distribution above is noncumulative. Demand shown at any rent represents demand at that level and higher. Source: Estimates by analyst

15

Data Profiles Table DP–1. Baltimore HMA Data Profile, 1990 to Current Average Annual Change (%)  

1990

2000

Current

1,164,762

1,257,910

1,321,615

5.0

3.8

3.7

Nonfarm Employment

1,152,800

1,250,500

Total Population

Total Resident Employment

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

Unemployment Rate (%)

  1990 to 2000

2000 to Current

0.8

0.7

1,321,700

0.8

0.8

2,348,219

2,512,431

2,617,000

0.7

0.5

Total Households

867,656

958,756

1,007,200

1.0

0.6

Owner Households

550,287

639,044

700,300

1.5

1.2

0.1

– 0.5

1.1

0.7

3.5

4.0

Percent Owner (%)

63.4

66.7

69.5

Renter Households

317,369

319,712

306,900

Percent Renter (%)

36.6

33.3

30.5

Total Housing Units

925,035

1,031,372

1,094,694

1.6

1.6

1.3

Owner Vacancy Rate (%) Rental Vacancy Rate (%) Median Family Income

7.2

6.1

6.8

$42,206

$59,324

$78,200

Notes: Employment data represent annual averages for 1990, 2000, and the 12 months through March 2008. Median family income data are for 1989, 1999, and 2006. Sources: Estimates by analyst; U.S. Census Bureau; U.S. Department of Housing and Urban Development

Table DP–2. City of Baltimore Submarket Data Profile, 1990 to Current Average Annual Change (%)  

1990

2000

Current

  1990 to 2000

2000 to Current

Total Population

736,014

651,154

624,500

– 1.2

– 0.5

Total Households

276,484

257,996

247,000

– 0.7

– 0.5

Owner Households

134,424

129,869

133,000

– 0.3

0.3

Percent Owner (%)

48.6

50.3

53.8

Renter Households

142,060

128,127

114,000

– 1.0

– 1.4

Percent Renter (%)

51.4

49.7

46.2

Total Housing Units

– 0.1

– 0.1

2.3

0.2

303,706

300,477

299,223

Owner Vacancy Rate (%)

2.0

3.6

2.5

Rental Vacancy Rate (%)

7.5

7.6

8.0

$28,217

$35,438

$36,031

Median Family Income

Note: Median family income data are for 1989, 1999, and 2006. Sources: Estimates by analyst; U.S. Census Bureau; U.S. Department of Housing and Urban Development

16

Data Profiles

Continued

Table DP–3. Northern Suburbs Submarket Data Profile, 1990 to Current Average Annual Change (%)

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

 

1990

2000

Current

  1990 to 2000

2000 to Current

Total Population

997,638

1,123,779

1,197,000

1.2

0.8

Total Households

373,721

432,047

466,400

1.5

1.0

Owner Households

257,862

307,775

341,600

1.8

1.3

0.7

0.1

1.4

1.0

NA

NA

Percent Owner (%)

69.0

71.2

73.2

Renter Households

115,859

124,272

124,800

Percent Renter (%)

31.0

28.8

26.8

Total Housing Units

391,552

451,140

487,778

Owner Vacancy Rate (%)

1.4

1.2

1.0

Rental Vacancy Rate (%)

7.0

5.6

6.5

Median Family Income

NA

NA

NA

NA = Data are not available. Sources: Estimates by analyst; U.S. Census Bureau; U.S. Department of Housing and Urban Development

Table DP–4. Southern Suburbs Submarket Data Profile, 1990 to Current Average Annual Change (%)  

1990

2000

Current

  1990 to 2000

2000 to Current

Total Population

614,567

737,498

795,500

1.8

1.0

Total Households

217,451

268,713

293,800

2.1

1.1

Owner Households

158,001

201,400

225,700

2.5

1.4

1.2

0.1

2.0

1.2

NA

NA

Percent Owner (%)

72.7

74.9

76.8

Renter Households

59,450

67,313

68,100

Percent Renter (%)

27.3

25.1

23.2

Total Housing Units

229,777

279,755

307,693

Owner Vacancy Rate (%)

1.5

1.0

1.0

Rental Vacancy Rate (%)

6.7

4.2

5.5

Median Family Income

NA

NA

NA

NA = Data are not available. Sources: Estimates by analyst; U.S. Census Bureau; U.S. Department of Housing and Urban Development

17 Data Definitions and Sources

Contact Information

1990: 4/1/1990—U.S. Decennial Census

Patricia Moroz, Economist Philadelphia HUD Regional Office

2000: 4/1/2000—U.S. Decennial Census

B a l t i m o r e , M D • C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

Current date: 4/1/2008—Analyst’s estimates Forecast period: 4/1/2008–4/1/2011—Analyst’s estimates

[email protected] This analysis has been prepared for the assistance and guidance of the U.S. Department of Housing and Urban Development (HUD) in its operations. The

Demand: The demand estimates in the analysis are not a forecast of building activity. They are the estimates of the total housing production needed to achieve a balanced market at the end of the 3-year forecast period given conditions on the as-of date of the analysis, growth, losses, and excess vacancies. The estimates do not account for units currently under construction or units in the development pipeline. For additional data pertaining to the housing market for this HMA, go to www.huduser.org/ publications/pdf/CMARtables_BaltimoreMD. pdf.

215–430–6682

factual information, findings, and conclusions may also be useful to builders, mortgagees, and others concerned with local housing market conditions and trends. The analysis does not purport to make determinations regarding the acceptability of any mortgage insurance proposals that may be under consideration by the Department. The factual framework for this analysis follows the guidelines and methods developed by HUD’s Economic and Market Analysis Division. The analysis and findings are as thorough and current as possible based on information available on the as-of date from local and national sources. As such, findings or conclusions may be modified by subsequent developments. HUD wishes to express its appreciation to those industry sources and state and local government officials who provided data and information on local economic and housing market conditions.

For additional reports on other market areas, please go to www.huduser.org/publications/econdev/mkt_analysis.html.